Lack of regulatory guidance from international and domestic authorities has hindered the broader adoption of cryptocurrencies since their conception. While some countries have embraced this new technology, most have issued either conflicting guidance or none at all. The Financial Action Task Force on Money Laundering (FATF), an intergovernmental policy-making body which combats money laundering and terrorist financing, plans to hold talks later this month focussed on establishing new guidelines for cryptocurrency services, providing much needed guidance to jurisdictions where it is currently unclear.

The FATF first issued recommendations regarding cryptocurrencies in 2015, placing cryptocurrency exchanges under similar rules as traditional financial institutions and requiring services to register with national authorities, screen customers, and report suspicious transactions. While this was a step in the right direction, an update in guidance has been highly anticipated as the space has evolved since.

The upcoming FATF discussions follow recent revisions made by the EU and Canada to their anti-money laundering and countering the financing of terrorism (AML/CFT) regulations concerning cryptocurrency exchanges. On June 8th, based on recommendations from a 2017 FATF evaluation, the Canadian government released draft regulations for cryptocurrency exchanges. The draft suggested that Canadian exchanges should be considered Money Service Businesses (MSBs), with requirements to report any trades over C$10,000 to the government. Similarly, the European Parliament ratified the Fifth Anti-Money Laundering Directive (5th AMLD) in April - an action plan by the EU that stipulates member states must register exchanges and place them under similar regulatory frameworks as traditional MSBs before the 18-month deadline.

Discussions on new, international policies, set for June 24th at the FATF’s headquarters in Paris, will focus on establishing best practices to serve as examples for cryptocurrency exchanges in adopting countries. Issues that may be addressed at the meeting include jurisdictions who have adopted adversarial stances against the use of cryptocurrencies and the development of AML/CFT obligations for exchanges only offering trading between different cryptocurrencies but not fiat currencies, which has so far avoided scrutiny.

Forged into new regulation, these policies will hopefully create a coherent and collaborative international framework for combating the use of cryptocurrencies in money laundering and terrorism in FATF member countries. Some member countries have already implemented revamped AML/CTF regimes while others will likely implement them as FATF guidelines take shape in 2019. In either case, the likelihood of continued change in these policies will require cryptocurrency exchanges to stay abreast of regulation in their home jurisdictions.

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